IT industry at odds over Kiwi jobs bill

Industry groups are at odds over a bill that could see local IT firms given preference over international bidders in Government tenders.

Local firms fear Government procurement is becoming a "closed-shop" for multinationals, the Computer Society says.

The private members bill, which aims to foster job growth in New Zealand and was released by Labour communications spokeswoman Clare Curran, establishes a commission of inquiry to determine whether the Government should have a policy that gives preference to local procurement without breaching international trade obligations.

The commission would also compare government procurement policies with those in Australia and other jurisdictions.

The policy would cover all procurement but Curran says the local IT industry would be one of the main beneficiaries.

Kiwi firms are losing out in government IT contracts, particularly lucrative software licensing contracts – which could be worth up to $1 billion a year – and feel there is a bias towards large, multinational players, she says.

"There's a huge degree of frustration about the lack of transparent process around the tendering of IT contracts."

Earlier this year, the Health Ministry rolled over a sector-wide software licensing agreement with Microsoft, despite a price increase, and there was no evidence it had gone to tender, she says.

The Education Ministry has also rolled over its software licensing contract with Microsoft on behalf of schools for another three years. Computer Society chief executive Paul Matthews says it would not support a policy that excluded any firms from tenders, but "all other things being equal", giving locally based or owned firms preference is a good idea.

There is a fear that moves to streamline procurement and deliver "shared services" to departments could see Government procurement become a closed-shop dominated by large multinationals and leave smaller New Zealand firms out in the cold, he says.

"If there's a fundamental benefit in using an off-shore organisation then go for it, but if there's just a trifling or minor benefit to it then we should be supporting the local industry. We've got a pretty focused and wide-ranging IT sector that's able to provide solutions alongside the world's best."

Brett O'Riley, chief executive of industry body NZICT, says it does not believe current policies discriminate against local firms, and the Government should target high procurement costs.

NZICT, to which many multinational firms belong, is part of the Government's procurement reform strategy group, which is assessing options for ensuring procurement is as efficient as possible and that company size is not a barrier to participation.

"Quite often it's the machinery of procurement that makes it difficult for companies to be engaged rather than anything to do with intent. If we can try and streamline that machinery and that process then . . . that would be a very significant step in getting a more level playing field."

He is unsure how a policy that would give preference to local procurement would work without breaching New Zealand's international trade obligations.

Vendors could instead be required to give evidence of their commitment to industry when applying for tenders to ensure that Government contracts led to local investment, he says.

The definition of "local firm" is also problematic as many IT firms in New Zealand are subsidiaries of multinationals and employ a lot of staff locally, he says.

Matthews says local firms could be defined as those that primarily pay tax within New Zealand.

Curran says the bill, which has to be drawn by a ballot before Parliament considers it, will not necessarily preclude New Zealand subsidiaries of multinationals such as IBM and HP being considered as local firms.

"There's no doubt that we want to give the New Zealand companies and the New Zealand-owned companies a boost, but we also want job generation for New Zealanders. That's the sort of thing the commission of inquiry would look at."

Don Christie, director of software firm Catalyst IT and Open Source Society president, says multinational firms receive the lion's share of government IT spending, and contracts are often tendered in a way that makes it difficult for Kiwi firms to respond.

"I am sure that many companies like Catalyst will support the thrust of the thinking behind this bill."

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